5 last-minute ISA mistakes to avoid before 5 April

As we get closer to the 5 April tax year-end deadline, savers and investors are limbering up for the annual ISA dash.

Despite more than 200 years of the tax year ending on 5 April, it still manages to sneak up on people, and many end up racing to sort their finances.

But while it’s incredibly common to be defeated by inertia until you’re assailed by a deadline, it’s worth cracking on as soon as possible.

It’s also important to watch out for the pitfalls you could fall foul of if you’re rushing at the last minute.

This article isn’t personal advice. Unlike cash, all investments can rise and fall in value, so you could get back less than you invest. If you’re not sure what’s right for you, ask for financial advice. ISAs and tax rules can change, and benefits depend on individual circumstances.

It typically only takes five minutes to set up an ISA online, but it pays to give yourself more time.

If you leave it to the last minute, and the transaction hasn’t completed by midnight, you’ll miss this tax year completely – and with it your chance to shelter up to £20,000 from tax.

You could also run into issues you hadn’t foreseen, like not being able to transfer money into your current account ready to invest in time.

So, it’s worth setting this up at least a few days in advance, just to be on the safe side.

If you’re rushing to open an ISA, it’s not necessarily the ideal time to be thinking carefully about your longer-term investment strategy.

If you already know where you want to invest, or you’ve already decided to opt for a ready-made investment, there’s nothing stopping you doing this late in the day.

However, if you haven’t been through this process yet, it’s a good idea to separate the decision to open an ISA and the choice of where to invest.

Before the deadline expires, you can put money into a Stocks and Shares ISA as cash, and choose where to invest later on.

Just remember, investing is all about time in the market and using the power of compounding to your advantage. So, while you don’t have to rush into a decision, do set aside time as soon as possible to plan where to invest the money.

Related article

Where to invest a last-minute Stocks and Shares ISA

Charlie Hutchence

Investment Writer

If you’re worried about investing all at once, you don’t have to.

Trying to time the market is notoriously difficult, even for professional investors. But even when you’re not trying to do anything particularly clever in terms of timing, you might want to avoid the risk of investing your annual allowance all at once, at what turns out to be a less-than-ideal moment.

The easiest way to avoid this risk is to put money into cash within a Stocks and Shares ISA before the deadline, to protect your allowance, and then gradually drip-feed the money into investments, month by month. That way you can spread the timing risk.

If you invest at various points through the year and have a Cash ISA and Stocks and Shares ISA with different providers, you can lose track of how much of your ISA allowance you have left.

If you hold them with a provider offering both ISAs, they will keep an eye on this for you. But if not, you will need to check exactly what you already have before you make any last-minute moves.

Another easy mistake is assuming your Lifetime ISA (LISA) allowance is in addition to your ISA allowance – it’s actually part of the £20,000 overall limit.

So, if you’ve maxed out your LISA in the current tax year, you have £16,000 to save or invest in an ISA elsewhere.

Most people open their ISA or top up online, because you can do it at any time of the day or night, without having to speak to anyone.

The process is straightforward, and all you need is a debit card or your bank details, the funds in your account, and your National Insurance number, to complete it.

However, give yourself time before the deadline, so you’re not needlessly rushing at the 11^th hour, especially if an issue comes up you weren’t prepared for.

If you do decide to call, our helpdesk staff will be there and happy to help. But we really don’t recommend leaving it until the last minute.